Southwold: Brewery, hospitality and retail business Adnams toasts “strong move forwards” in its first half performance

Southwold brewery, hospitality and retail business Adnams is toasting a “strong move forwards” in its half performance compared with the same period last year as good weather combined with innovation and brand development to help it to a 29% rise in operating profits.

Turnover rose 15% to £30million, while operating profits increased to £862,000. Meanwhile, its beer volumers were up by 18%.

However, its unaudited pre-tax profits were halved from £1.327m to £0.673m as a result of reduced property profits. In 2013, profit before tax was boosted by property profits of £789,000, notably from the sale of the Southwold Arms. Although the company currently has a number of pubs on the market, only one sale took place in the first half, the Queen’s head at Brandeston, which meant property profits were much lower at £107,000. However one property has been sold after the June 30 first half deadline and more sales are expected to follow.

Chairman Jonathan Adnams pointed out that the company’s first half profits can be “quite variable”, with profits weighted towards the second half.

Within the beer market, he said overall trends had improved “a little”.

But he added: “On the pub side, the most recent data, which relates to the period from April to December 2013, showed pubs closing at a rate of 28 per week, a slight increase on the previous period. In our own estate we have seen smaller rural pubs under particular pressure.”

However, its beer business had done “very well”, he said, with both overall volumes and cask volumes up by 18%, “robust” sales of Adnams Ghost Ship, and “good growth” from its Jack Brand range. The company had been successful in working with other brewers on “collaborative brews”, developing its beer brand and growing its business with managed pub companies, he added.

“The largest drive of the volume increase in the last six months came from this strategy. We are delighted with this achievement, but such beer volume is volatile and can vary by large amounts between different periods,” he said.

After five years of holding prices, it had increased them by 3%.

“The long period of holding our prices has helped to make this a palatable matter for our customers at a time when prices have been under pressure from the fast-growing numbers of small brewers and the longer-term trend towards reduced consumption. Our sales to supermarkets and other take home outlets have recently been in strong growth, though this slowed a little in the first half of 2014 to about 5%,” said Mr Adnams.

Its small but growing spirits business, meanwhile, saw volumes rise by 40%, and has been buoyed recently by an international award, the International Wine & Spirit Competition’s ‘Trophy for Vodka’, following on from a similar accolade for its gin last year.

On the hotel side, he admitted that trade at the Swan and Crown had been “challenging”. But Adnams had been persuading its customers to book through its own website and had seen greater continuity in staffing. It had restructured elements of its pay arrangements to move lower paid staff towards the Living Wage, with hotels staff the largest proportion to benefit.

Its shops enjoyed their continuing “positive trend”. It had opened a new shop in Aldeburgh, but closed another in Bloomsbury. The company will also be closing its Waterside shop, a concessionary area based at a garden centre in Peterborough, later this year. Online shopping has grown quickly, it said, with online ordering starting to overtake mail order.

“The first half of 2013 was not strong, but the second half showed good growth so comparators will be much tougher. Fundamental trends within the beer and pubs industries will not alter quickly and the better weather and improved economic outlook will not always be the case.”

The business had been unafraid to make major investments and transformed its brewery in particular over the last 10 years, he said, and the company is planning further investments to build additonal production capacity.